Any fairytale needs a hero and a villain. Neither can exist without the other, and there have been some fantastic villains. You’ve got the obligatory evil stepmother, the snow queen, and even the big bad wolf. Any one of which is sure to send shivers down your spine.Sad to say, such villains don’t only exist in books. There are many real-world villains, too. They make themselves known in the criminal, political, and even financial world. If we had our way, there would be no bad guys when it comes to finances. But, that’s rarely the case. Both our personal and business finances go up against the baddies. This can be tough enough with private finances, but when your business is up against it, the risks are even more substantial. That is unless you find a way to defeat those baddies. Which is precisely what we’re going to look at here.

DebtThe first financial villain is debt. It makes itself known, even in the business world. There’s no way to start an enterprise without borrowing, or spending, a significant amount. Of course, that isn’t an issue if profits cover the cost. But, if your business takes a while to get off the ground, debt can get out of control. When you’re failing to pay large amounts, there’s a risk that your company could go bankrupt. To make sure that doesn’t happen, it’s essential to get a grip on finances. Cut costs and do your utmost to meet payments. If there is a delay, talk to the company in question. With open communication, it’s likely you’ll be able to reach an agreement. If you keep quiet about your troubles, however, you’ll soon find yourself in a bad situation. Bad creditIn many ways, bad credit is debt’s right-hand-man. If you miss payments, you can be sure that bad credit will follow. And, this can make life difficult in many ways. For one, it’s a black mark against your business. On top of which, this will make it difficult to get a loan down the line. The good news is that there are still options out there. With a fast business loan, bad credit doesn’t have to ruin your options. What’s more, keeping up with payments on this second loan can improve your credit rating. As such, facing the fear here could be the best method of defeat.

Unexpected expenses

Villains love to make us jump, and unexpected business expenses often do just that. Just when we think we’ve found our financial footing, you can guarantee that a breakage of some sort sets us back again. The best way to defeat this villain is to save a rainy day fund. When things are going well, set aside as much money as you can. Then, you can dip into this if anything happens. A fast loan, like those mentioned above, can also save you here. But, remember that you won’t have to repay your savings, so that’s by far your best option.

Most people don’t get into debt out of sheer stupidity. Most people get into debt because they have not been educated about money – or more specifically borrowing money. They find themselves in a situation whereby they need money quickly, and they borrow it without fully understanding what they are letting themselves into. There are then those who are enticed by all of these amazing promotional offers, and they sign up to a number of credit cards without considering how this is going to impact their rating. The obvious solution may seem simple: avoid borrowing money altogether. However, if you do this, you won’t have a credit history at all, and this is arguably just as damaging as having a bad credit report. So, we need to educate our children about borrowing money responsibly, the impact of borrowing on their credit report, and what to do if they do find themselves in debt. After all, in some cases, debt is unavoidable.

LESSON ONE: THE VARIOUS WAYS YOU CAN BORROW MONEY

Firstly, you need to make sure your children are aware of the different methods of borrowing money. In general, this can be split into two categories: loans and credit cards. Of course, there are then many different types of loans and credit cards. With regards to the former, you will be given a certain amount of money, which you will then have to pay back to the lender with interest on top. With a credit card, you will have access to a certain amount of money, and you will only be subject to interest if you do not pay the full amount off by a certain day of the month. Credit cards are ideal for those who need access to money to tick them over until they get paid. If you are self-employed, for example, and you don’t know what date of the month your money is going to come in, you can use a credit card to tide you over until then. A loan is more suitable when you are making a large purchase. There are many different types of loans, including bank loans, secured loans, and payday loans. The latter provides afast loan approval for those in need of money as quickly as possible. However, the APR tends to be very high, so you’ll end up spending a lot of money taking the loan out. A secured loan will be secured against one of your assets, for example, your car or your home. If you default on your payments, the lender can sell your vehicle or your property to cover the payments you have missed. It is important to teach your children about the different factors they need to consider when taking out a loan or applying for a credit card. A lot of people never learn about APR, and so they end up borrowing money without having a full understanding of how much they are paying for it. This is an easy way to get into debt, and it can be avoided with simple education.

LESSON TWO: CREDIT REPORT

The next thing you need to teach your children about is their credit report. Explain that their credit report is something that a lender will view when determining whether to lend them money. This does not only relate to companies who deal with loans and credit cards, but catalogue companies, furniture stores offering financial plans to pay off furniture over the course of a few years, phone contract businesses, and such like. It is, therefore, critical to maintain a goodcredit score. Unfortunately, a lot of people end up causing damage to their credit report without even realising it. This is why you need to teach your children about the different aspects that do and do not impact a credit score, and the steps they can take to improve their credit score. One thing a lot of people do not realise is that they do not have one set credit score. There are a number of companies that provide credit reports, and most companies and lenders will look at one or several credit reports to gauge whether someone is credible to lend to. People can access their credit reports online, and it is a good idea to do so, so that you can have a general understanding of what your score is, where you are going wrong, and where you are going right.

So, let’s go over the different elements that make up your credit report, and the impact they have:

Your personal information – One of the easiest and most effective ways to improve your credit score is to make sure that all of your personal information is up to date. If it isn’t, lenders may struggle to verify who you are, and this can have a negative impact on your rating. Plus, if your personal details aren’t correct, you could miss out on notifications, which could result in you failing to pay a bill, which will, of course, have a bad impact on your credit score.

The total balance of your active credit accounts – The total balance of your active credit accounts plays a crucial role in determining your score. If you have a mortgage, this will not be included within the calculations. This includes your credit cards, any purchases you are still paying for, overdraft facilities you are using, and any loans you have taken out. If you owe more than $15,000, this will have a negative impact on your credit score. If you owe more than $30,000, this will decrease your score even further.

How much of your available credit you are using – There are a number of factors to consider here. Firstly, your highest credit limit will play a role. If you have acredit card with a limit over $1,000, this will improve your credit rating, as it shows that you are a low risk borrower. However, you also need to think about how much of your available credit you are using. For example, if you are using 95 percent of the credit you have available to you, this is bound to have a negative impact on your score, as it indicates you are relying heavily on credit.

Payments – Are you keeping up with your payments? This is the most important factor of them all when it comes toyour credit score, as a late or missed payment will stay on your account for roughly six years.

The age of your credit accounts – Again, there are a number of factors to take into account here. Firstly, the average age of all of your credit accounts is considered. Having an average age of 33 months or more is considered a positive. Also, the number of new credit accounts you have opened. If you have opened a number of accounts within a three-month period, for example, this will have a negative impact. However, if you have only opened one credit account, this will not have a bad impact on your score.

Credit applications – This is where a lot of people have a negative effect on their score without even realising. Many people decide to make numerous credit applications, and then they will accept the best credit card they get approved for. A lot of people also try their luck, applying for cards they are unlucky to get accepted for on the off chance that they will. This will have a negative impact on your score, as credit applications are included in your report. There are soft searches, which don’t impact your score, and hard searches, which do impact your score. The best thing to do is use one of the online services that are available to determine your chances of being accepted. This ensures you only apply for credit cards whereby you have a high chance of approval, so that you don’t need to carry out numerous applications.

LESSON THREE: WHAT TO DO IF YOU GET INTO DEBT

Last but not least, it is important not only to teach our children about avoiding getting into debt, but also about what to do if you do get into debt. The problem can easily get worse and worse when someone does not know how to deal with debt. It can seem like the end of the world, but it doesn’t need to be. In fact, you will find plenty ofinspirational stories on the Internet about people that have gotten themselves out of severe debt.

Most people agree that the best way to tackle debt is to pay off the biggest debt first while making the minimum payments on all loans and cards to ensure you are not subject to any further fees. You should also ring up your credit card provider or any other lender you owe money to and see if you can negotiate more favourable terms. It is then a case of examining where you went wrong and how you got into debt in the first place. This will help to ensure you do not make the same mistake again.

There will be a time in everyone’s life when you want or need to buy something, but don’t have enough cash to do so. When this time comes, you usually have two options; You can either not buy the thing that you wanted/needed to buy (or buy it later, when you have the money spare), or borrow the money from someone. If it’s an emergency or you’re really impatient then borrowing, whether it be from a loved one, the bank, or an online lender, will probably seem like a great idea. However, there is a lot to take into consideration before you borrow money from anywhere. Here are some pros and cons that you should know about.

+ Covers Emergencies

There is always a chance that something can go wrong in life, and sometimes, money is required to fix this problem. It doesn’t matter if you’re boiler has just broken, you get an unexpected bill, or you’ve just run out of money if you need money quickly then applying for cash loans online is usually the first thing that you think of.

– It’s Not Free

Everything comes at a cost, and borrowed money is no exception. When you borrow money, the interest rates can get incredibly high, with the late payment fees being even higher, so you need to be sure to make payments when they’re due and read all of the small print before applying. Even loved ones sometimes add interest to money you’ve borrowed, but, even if they don’t, if you can’t afford to pay the money back, the strain on the relationship is a high cost to pay.

Unless you have a large amount of money saved, there are some purchases that you simply can’t make unless you borrow money. A house, a car, and business premises are the biggest examples. Your regular income wouldn’t be able to cover the cost of these things, but you can still buy them if you borrow money.

– You Might Not Be Able To Pay It Back

As I’ve already mentioned, there is always the chance that something can go wrong. Unfortunately, if there is an emergency, or you got paid less one month, you might not be able to make a payment, which means that a late payment fee might be added to the loan. If this happens a few times, the debt could get so big that you just can’t pay it back.

+ Opens Doors And Opportunities

Borrowing money isn’t always ideal, but sometimes, it is exactly what you need to improve your life one way or another. Buying a car would mean that you can travel further for work, which means that you might be able to get a better job. You could even take out a loan to start your own business, which could prove to be incredibly successful.

People borrow money for all sorts of reasons, but you should always make sure that you’re borrowing for the right reasons, and that you have the cash to make the repayments.

Millions of people around the world use credit cards and despite our best intentions of clearing the balance very month, most of us will carry a balance. In fact the average outstanding credit card balance is $5700 in the USA (source ValuePenguin) and is over £2500 in the UK.

Chances are when you take out a new credit card you will be offered the opportunity to pay via direct debit either the full balance or the minimum amount every month. Since most people use credit cards as flexible spending for emergencies or contingencies it can be difficult to commit to paying off the full amount. This is especially true when transferring a balance from another card.

Statistics show that over 65% over credit card holders carry a balance from month to month

Did you know that if you opt to pay the minimum balance you could take over 20 years to pay off the card? It is far better to agree a fixed monetary amount each month than the percentage which is often suggested by the credit card company.

When it comes to money, people often find themselves stuck in a financial rut because of bad management. The best way that anyone can avoid getting themselves into a mess is to be proactive about how money is managed and spent. The trouble is, money is such a tempting thing and getting into debt is far easier than it should be. Many people fall into the trap of short-term satisfaction with credit cards and loans and then have to suffer the long-term difficulties of making repayments.

It can be very easy to run up a mountain of debt through credit cards as they are so very easily available. Trying to avoid being in a rut means a lot of self-control and willpower, and only paying for things as you can afford them. The trap happens where you need to borrow and repay money on time to build an efficient credit rating, and that can spiral out of control. There are companies that are out there like creditrepair.co that can assist with fixing your credit rating as you need it, but it sometimes can be better to avoid the bad credit in the first place. There are some ways you can manage your money and not get stuck in a rut of debt, and we’ve got some of those below for you:

Keep Employed. Okay, so it’s not always possible, but maintaining a secure level of employment is a great way to minimise debt. Secure income means not having to turn to other means to get things paid, as you have a regular amount coming in each month. By ensuring you don’t lose your job, you can keep things smooth and ticking over correctly. Losing a job can happen randomly and sometimes this can be without fault, and you want to avoid this happening as much as possible. Maintain a network with your colleagues and clients so that if recession hits and you are made redundant, you have contacts in your field to fall back on.

Pay Taxes. Taxes are one of those bills that you must pay no matter what happens. Owing money is hard enough but owing the IRS is a whole other ball game. Make your tax payments a priority as early as possible in the year, and be vigilant about keeping money aside each month to pay for your taxes. Contacting the IRS and enquiring about extensions or making part payments is going to help if you feel like you can’t manage your usual tax bill, but if you don’t call them that’s where the issues begin. Avoid that debt by being organised.

Ultimately, you have to be savvy. When it comes to buying the things that you want, only get the things you can afford. If you can’t afford what you want, then it’s time to save up and wait. Don’t just move onto the credit cards or tap into your savings as you will likely need your savings! Be financially smart and you can reap the reward as you go!